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Potential for fairer income distribution

The potential for a fairer distribution of income has been highlighted in a report from the High Pay Centre. It charts the 'meteoric' rise in pay for those at the top of the distribution, and gives examples of how the resulting inequalities could be flattened out.

The High Pay Centre is a non-party think tank established to monitor pay at the top of the income distribution.

Key points

The share of national income going to the top one per cent of the income distribution has more than doubled since 1979, to 14.5 per cent from 6 per cent – returning the UK to levels of income inequality last seen in the 1930s.

These huge disparities, combined with the government's abolition of the 50p top rate of income tax, have 'infringed any sense of fairness in pay'.

There are 29,000 people (the top 0.11 per cent of the income scale) who earn more than £500,000 a year: but in contrast there are 6.75 million people (the bottom 25 per cent of earners) who earn less than £800 a month.

Even a modest level of redistribution could make a substantial difference to the standard of living for those on low earnings, and 'would not be greatly missed' by those at the top.

A 10 per cent redistribution from those earning more than £300,000 a year (the top 0.25 per cent), for example, would give a pay rise of £40 a month to those on the lowest 25 per cent of pay rates.

If those earning more than £150,000 a year (the top 0.9 per cent) took a 10 per cent pay cut, the bottom 25 per cent of earners would get a 55p an hour increase in pay, taking it from £6.80 to £7.35 – approaching the national living wage of £7.45.

Boosting pay lower down the scale would inject more spending into the economy and help counter the recession. Smaller pay gaps also improve the way businesses function, improving employee engagement and public trust in companies.

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PSE:UK is a major collaboration between the University of Bristol, Heriot-Watt University, The Open University, Queen's University Belfast, University of Glasgow and the University of York working with the National Centre for Social Research and the Northern Ireland Statistics and Research Agency. ESRC Grant RES-060-25-0052.